FLOT vs VCSH

FLOT—iShares Floating Rate Bond ETF

VCSHAVanguard Short-Term Corporate Bond ETF

In short

FLOT The oddball in the short-corporate aisle: FLOT owns bonds whose coupons reset with short-term rates, so interest-rate sensitivity stays near zero while the credit stays investment grade. Running since 2011.

VCSH Corporate credit, kept short. VCSH tracks an index of investment-grade company bonds maturing in one to five years, at three basis points: you take company credit risk instead of government risk, with muted sensitivity to rate moves.

Stated mandate

FLOT The fund seeks to track an index of U.S. dollar-denominated, investment-grade floating-rate bonds, offering exposure to corporate debt while seeking to reduce interest-rate risk and generate income.

VCSH The fund seeks to follow a market-weighted corporate bond index with a short-term dollar-weighted average maturity, using index sampling and investing at least 80% of assets in index bonds.

Why people hold it

• FLOT Coupons reset periodically instead of sitting fixed, which keeps interest-rate sensitivity very low. Rate swings move it far less than fixed-coupon bond funds.ishares.com
• Investment-grade paper only, with maturities from one month to five years, spread across about 600 holdings. No junk, no long bonds.ishares.com
• Pays monthly, trades actively, and has tracked its Bloomberg floating-rate note index closely. A multi-billion-dollar fund with a record going back to 2011.

• VCSH A 0.03% expense ratio, versus a 0.12% median across its peer group. That is Treasury-index pricing for a fund doing corporate credit work.
• Running since 2009 and now a multi-billion-dollar fund that trades actively, which is one of the easier profiles to get in and out of in its category.
• Samples the Bloomberg U.S. 1-5 Year Corporate Bond Index with at least 80% of assets in index bonds, and its book lines up closely with that benchmark.vanguard.com
• Distributions land monthly, not quarterly, and it sits among the strongest implementations in its cost-and-tracking peer group.

Worth knowing

• FLOT At 0.15% it sits right at the median for its short-corporate cohort, but fixed-coupon peers like VCSH (0.03%) and SPSB (0.04%) charge a fraction of that.
• The float cuts both ways: income follows short-term rates, so the monthly payout shrinks when those rates fall.ishares.com
• Low rate sensitivity is not credit protection. This is corporate debt, and prices can slip when credit spreads widen.

• VCSH These are company bonds, not government paper. Investment grade, but credit spreads can widen when markets get nervous, and Treasuries do not carry that risk.vanguard.com
• The one-to-five-year maturity band cuts both ways: smaller price swings when rates jump, and less duration to work with when rates fall.vanguard.com
• Index sampling means it holds a representative slice of the benchmark rather than every bond in it, so small differences from the index are normal.vanguard.com

Full FLOT profile⁠

Full VCSH profile⁠